We've been reporting for over a month now how coincidental it that the risk-rally has stalled at the origin of the GFC supply imbalance 10y ago. Also, how the macro pennant seen in the weekly shows a time projection of breaking around the US mid-term election. However, with the latest rally in risk, we may be just 1 day away from that milestone to happen this...
The progressive recovery in the Aussie continues to be a function of a neutral to weak USD, along with higher Gold prices. What's more, the Australian vs US 10-yr yield spread trades near the highs of the week, in line with global DM rising yields, also assisting the reshuffling of portfolios into a more appealing Aussie. The latest push higher in the US...
The limited range traded in USD/JPY, while it may appear inconclusive on the surface, it reinforces a certain bullish narrative, especially when combined with a rising risk-weighed index. So, looking at Tues/Wed's price action, the vast majority of the volume has been transacted near the highs of the week (above 112.00), which implies acceptance by market players...
The Sterling went through a volatile ride on Wednesday, initially boosted on higher-than-expected UK CPI numbers, only to lose all its advantage and some more evaporate as a reflection of renewed Brexit pessimism. The pair ends with most of the volume transacted in an area of 50 pips, with over 30-40pips of upside/downside extensions not finding enough...
As the picture stands, the pair has firmed up its current range-bound profile, with well-defined edges between 1.17/1720 and 1.1650. The latest price action is inconclusive, dominated by market makers at the extremes of the range. The negative brexit headlines in the last 24h, together with rising Italian bond yield premiums vs the German (purple line) and a...
The EUR/USD looks set to encounter a fairly constructive environment to extend gains following the rise in the German vs US yield spread coupled with a significant reduction in the Italian bond premium. The close at 5pm NY near the high of the day is another clue that longs may remain committed to carrying positions into the next area of liquidity at 1.1720. The...
In this chart exercise, it becomes blatantly clear why the Aussie is often referred to as a proxy for emerging markets. We've created an EM-weighted index with 7 currencies (Argentinian Peso, Turkish Lira, Russian Ruble, South African Rand, Chinese Yuna, Indonesian Rupiah, Indian Rupee). Do you notice the extremely strong negative correlation? As long as the...
In this video, Ivan Delgado, Head of Market Research at Global Prime, provides a walk-through of the latest price action in the EUR/USD. Ivan highlights a potential buy-side opportunity may be developing in the pair should the German vs US bond yield spread keep the present structure. Ivan also touches on his personal step-by-step process to exploit divergences...
In the following video, Ivan Delgado, Head of Market Research at Global Prime, walks us through the different scenarios that can exist when trading risk. Ivan simplifies the reading of the environment as a trader one can encounter by combining the price behavior of the SP500, US 30-yr bond yield, US Dollar index, and to a lesser extent, Gold, as it's become more...
When experimenting with various financial instruments, one has to confess how strikingly coincidental it is that the risk-rally has stalled at the origin of the GFC supply imbalance 10y ago. At the same time, if one is to project when the macro pennant seen in the weekly may break, it also falls on the same week as the US mid-term election, which few can argue,...
It's the first time in Sept that the EUR/USD exhibits such an accentuated divergence against the German vs US 10-yr bond yield spread. The last time it occurred, back in late Aug, the market eventually sold off to re-adjust its true value. What this divergence implies is that any rally runs the risk of being short-lived in nature and be gratefully sold by the...
As our proprietary risk-weighted index shows, the recovery above the 100-ema in the hourly chart suggests that in the short-term, risk-seeking conditions are likely to be dominant, even if major events as the ECB, BoE or US CPI will also have a major impact in volatility. The index has been mainly assisted by the sell-off in the USD, allowing a significant...
The rate has been trading on an upward trajectory this week, and Tuesday's price action constitutes yet further evidence that the trend is set to continue based on the increase in the US vs JP bond yield spread (red line in the chart) and the recent re-emergence in risk appetite, as one can notice via our prop risk index (black line). Last Friday's increase in...
The Australian Dollar remains one of the most vulnerable pairs to extends its well-established downward bias. First and foremost, one must be reminded that in the last CoT report, the smart money added shorts aggressively, reinforcing the notion that the downward pressures are here to stay. On top of that, the counter-intuitive moves of dismissing a positive Aus...
Heading into Wednesday, the structure of the market seems to suggest that sellers will ultimately be the side exerting the most pressure, judging by the decline in price that has negated the developing bullish structure and sets into motion, potentially, a test of lower liquidity levels. The velocity of the fall in prices cannot be ignored, and more often than...
The exchange rate should find it difficult to build upon further gains as neither fundamentals nor correlations argue for a breakout of 1.1615-20 as things stand. The reduction in Italian yields, coupled with an increase in the 10-yr German vs US yield spread has bolstered the rate, but a depressed 2-yr yield spread, decreasing volumes on the way up and a...
Ever since mid August, the US Dollar has maintained a much stronger correlation with the US yield curve. To illustrate this relationship, in the chart one can see the curve in blue and the DXY index in green, with the red lines the long and short-dated bond yields. As the focus shifts towards re-pricing a more aggressive Fed cycle, expect the US yield curve to...
The Australian Dollar has been one of the most fragile currencies in Sept, which when combined with the resumption of the USD strength, makes for some clearly definable directional move, taking the rate to its lowest levels in years. Judging by the close on Friday, there is no indication whatsoever that sellers are willing to take profits off the table just yet,...